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I’m in College. Should I Start Saving for Retirement?

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It is never too early to start saving for retirement. In fact, the sooner you start, the less you will need to save in the long run. This means more money in your pocket to spend on non-retirement over your lifetime, and if you want to retire early rather than working to 65 or 70 like so many Americans, this is your golden ticket.

The Power of Compounding Interest

As a millennial, you have the greatest retirement tool: time. It’s a commodity that you can’t get back as you get older and one many boomers would be jealous of. The earlier you start investing, the more time you’ll have to let compounding work for you. You add less now but have more later. Use a retirement calculator to determine your savings goal, a compounding tool to see the numbers, then create a plan and stick with it.

It can be difficult for a young person to save big money during and right after college, considering many students only work part-time or not at all while in school. Entry-level salaries may also not provide a big savings cushion, and high levels of student loan debt, too, can eat into a young person’s savings.

However, let’s assume for illustrative purposes that Christine saved $600 per month in college for 5 years, from the time she turned 18 until she turned 23. She saved $1,000 per month for 7 years after college when she began working, from 23 until she turned 30. After those 12 years, she stopped saving and left the money in her account, where it continued to accumulate interest at an annual rate of 5% until she retired at age 65.

Now let’s compare her to Jason, who didn’t start saving until after college on his 24th birthday, when he got his first “real” job. He put away $1,000 per month for 13 years, until he turned 37. He also left the money in his account, where it continued to accumulate interest for 28 years at a rate of 5% per year until he turned 65.

Over a 13-year period, Jason contributed about $156,000 and, over a 12-year period, Christine contributed about $120,000. Christine saved $36,000 less than Jason, but she wound up with about $21,000 more than Jason had saved for retirement. Remember, she also saved for one year less than he did.


If Christine chooses, she can stop contributing at age 30 and have more money in her pocket for other goals (if she has determined that this retirement amount at age 65 is sufficient). Jason, on the other hand, is saving in his 30s when other constraints like starting a family or mortgage payments may make it difficult to save for retirement.

Christine can use that money from age 30 to 36 to travel, save for a house or add to her retirement account to help it grow even more. The latter would very easily contribute to the possibility of her retiring earlier than 65, creating a more secure retirement and helping to ensure that she will not need to work due to poor planning. The point is, she has more options – saving earlier has created the financial freedom to let her live the life that she wants.

How to Super-Charge Your Savings

These results can be further enhanced by utilizing an employer match in a deferred plan such as a 401K to reduce your actual weekly out-of-pocket contribution to your retirement account. Plus, it’s free money (as long as you meet your company’s vesting requirements).

The bottom line is, saving is like a muscle; it takes discipline, much like going to the gym. Start slow and early and keep building, and you lessen the chance that you may face the painful task of trying to catch up later in life.

You can consider consulting a Certified Financial Planner (CFP®) for comprehensive advice on calculating your retirement goal amount and strategies to support savings for this and other life goals. (Full disclosure: I am a CFP®.) And as you work toward those goals, you can see how your habits are affecting your credit by viewing two of your credit scores, updated each month, for free on Credit.com.

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